Summary Judgment on Plaintiff's Common Law Fraud Claim not Appropriate Where Inferences Could Favor Defendant

Torts/Civil Procedure - Propriety of Summary Judgment on Plaintiff's Fraud Claim

Comerica Bank v. Mahmoodi, 581 Ariz. Adv. Rep. 27 (App., Div. I, May 4, 2010) (J. Swann)

SUMMARY JUDGMENT FOR PLAINTIFF ON COMMON LAW FRAUD COMPLAINT WHERE DEFENDANT BECAME INCAPACITATED AND COULD NOT REMEMBER TRANSACTION MUST FAIL DUE TO INABILITY TO FULLY ESTABLISH KNOWLEDGE AND INTENT TO DEFRAUD

Plaintiff Comerica issued a line of credit and promissory note for $7.5 million for defendant's computer business. When the business got shaky the note was called in and defendant declared bankruptcy. His representations thereafter to Comerica regarding his accounts receivable varied dramatically from what he reported to the bankruptcy court so Comerica sued him for common law fraud. During pendency of the lawsuit the defendant was in an automobile accident which rendered him mentally incapacitated and unable to remember the facts surrounding the fraud claim.The trial court granted plaintiff summary judgment on the fraud claim but the Court of Appeals reversed. First the court noted that the burden for a plaintiff to get summary judgment on the basis the defense has not rallied adequate evidence to defeat the motion is higher than the burden for a defendant to get summary judgment on the same basis since from the "get-go" the plaintiff has the burden of proof to establish its claim. Even where the evidence submitted in support of the motion strongly favors the movant, the court must view the evidence most favorably to the nonmovant and where a jury could reasonably infer in the defendant's favor on any one element of the claim summary judgment must be denied. This is true even when the trial court believes the plaintiff will or should win before a jury.Here there are nine elements that must be proven by clear and convincing evidence to prevail on a fraud claim: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it be acted upon by the recipient in the manner reasonably contemplated; (6) the hearer's ignorance of the falsity; (7) the hearer's reliance on the truth; (8) the hearer's right to rely on it; (9)the hearer's consequent and proximate injury.Here the plaintiff met its burden on all elements except falsity, defendant's knowledge of falsity and proximate injury. Granted the evidence was adequate on all these points to meet the burden of proof at trial but not to be awarded summary judgment before trial. A jury could reasonably infer these elements were not proven by clear and convincing evidence.